Finance Chapter 8

.Marilyn Simms died with a $200,000 life insurance policy. Her husband, Jack, is the primary beneficiary, and their children, Mimi (age 24) and Ann (age 30), are the contingent beneficiaries. All three survive Marilyn. How will the policy proceeds be distributed

Jack because he is the primary

. ___________ is any activity that lessens the severity of loss once it occurs.

Loss control

. ___________ is an effective way to handle small exposures to loss when insurance is too expensive.

Risk assumption

. Insurance companies use _____ to determine whom they will insure and what they will charge for the coverage.

Underwriting

By ___________, insurance companies decide who will be insured by them

Underwriting

Underwriting refers to _____:

lender or other financial service uses to assess the creditworthiness or risk of a potential customer

Most accurate way to determine how much life insurance you need to use the ____

needs analysis method

A life insurance policy can be structured so that the death benefits are paid directly to a named beneficiary, which means that _____.

the cash benefits from your life insurance policy cannot be claimed by creditors.

. Insurance companies make profit by:

paying out less than the sum of the premiums and the earnings on them.

A(n) _____ policy is a type of term insurance.

straight term

Universal life insurance is

A combination of whole life insurance and term life insurance.

The settlement option chosen by most policyholders is

Lump sum

The underwriting function of insurance companies is designed to ensure that premiums are based on_____.

The chance of loss

The most preferred technique for determining how much life insurance coverage is needed for an individual is

Adverse selection

Which of the following is true of a good insurance agent?

Agent is recommended by professionals like bankers and attorneys

. _____ can be both an advantage and a disadvantage of universal life insurance.

Flexible premiums

A(n) _____ policy is a contract between an individual and a company under which the company agrees to reimburse the individual for losses suffered by him or her according to specified terms.

Insurance

Marilyn Simms died with a $200,000 life insurance policy. Her husband, Jack, is the primary beneficiary, and their children, Mimi (age 24) and Ann (age 30), are the contingent beneficiaries. All three survive Marilyn. How will the policy proceeds be distributed

Jack. Because he is the primary beneficiary

The probability of a loss occurring can be reduced by_____.

Loss prevention

___________ is the choice to accept and bear the risk of loss.

Risk assumption

_____ involves abstaining from any activity that will affect an individual financially.

Risk avoidance

Which of the following is true of risk avoidance?

Risk avoidance is any activity that helps evade an act that creates a risk.

. You can learn about the financial strength of an insurance company by checking ___________ rating system.

Standard & Poor's

Which of the following types of insurance policies provides temporary coverage for a set period?

Term life insurance policy

The primary purpose of life insurance is to provide:

financial security for dependents in the event of death

Employers often provide _____ life insurance as a fringe benefit for their employees

group

any activity that lessens the severity of loss once it occurs

loss control

The _____ method is the most accurate method of determining the amount of life insurance coverage needed for an individual.

multiple of earnings method

. A life insurance policy can be structured so that death benefits are paid directly to a(n) ___________, which means that creditors cannot claim the cash benefits from the life insurance policy.

named beneficiary

The primary purpose of a life insurance plan is to help:

protect the dependents of the insured from financial loss in the event of their death

The insurance portion of a universal life policy is most analogous to:

term insurance

Insurance underwriting is best described as:

the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums